SanDisk has released a new hard drive made of flash memory, and the price won't completely break the bank.

The flash memory maker's new flash drive sports 32GB of memory and is delivered in a package the same size and shape as a 2.5-inch diameter hard drive. Earlier this year, SanDisk released a 32GB drive in a 1.8-inch diameter package. Drives that size typically are used in MP3 players, while most notebooks come with 2.5-inch drives.

SanDisk is selling the 2.5-inch drive for $350 to large volume buyers. That's far more than a 32GB hard drive typically would cost. Still, it's less than SanDisk's previous 1.8-inch drive, which cost $600 more than a conventional 32GB drive, according to SanDisk.

Chalk up the decline in price to the drastic pricing reduction experienced by the flash industry. After a few years of bounding revenues, bad news for flash makers began to crop up in August 2006, when reports showed that revenue wasn't growing as fast as in the past and that flash prices were dropping faster than expected. Supply started drifting upward while demand stabilized, and prices started dropping at 60 percent, faster than the historical norm of 42.7 percent.

Flash memory makers like SanDisk and Micron Technologies have laid out plans to make flash-based drives that will start to displace hard drives in notebooks over the next few years. Flash memory is more reliable than hard drives and can store more information in a smaller space, which will allow notebook makers to reduce the size of their computers. Flash makers produce 1.8-inch and 2.5-inch drives now so that their products will fit into existing notebooks.

Flash memory also consumes far less power than hard drives.

Unfortunately for flash manufacturers, flash also costs far more than hard drives. One gigabyte of hard drive space at retail costs less than 50 cents. A 1GB flash card probably costs close to $20. A 1-terabyte drive at retail, which holds more than 31 times as much data as SanDisk's 32GB drive, costs $500, or less than the SanDisk drive.

In the wholesale market, flash costs seven to eight times more than hard drives, according to some analysts.

Drive makers also point out that laptop manufacturers are putting 80GB and 120GB drives in their notebooks so users can store video and music; flash makers can't match that kind of capacity without raising the price of notebooks sky high.